How the coronavirus crisis sealed Big Tech’s domination

Linda J. Dodson

“To sum it up: the strong will get stronger,” says Sir Martin Sorrell, veteran advertising magnate who turned WPP from an obscure shopping basket maker into the world’s biggest ad group before being pushed out in 2018. His new, internet-focused company S4 Capital is also poised to benefit from what he describes as a forced leap forward in technological adoption driven by the digital equivalent of the old oil industry’s mighty “seven sisters”. 

“We’re seeing clients switch money into digital media,” Sir Martin elaborates. “If you just think about the data [tech firms] are accumulating, they will have a huge benefit…. I think there will be a fairly quick recovery, although I’m probably in a minority in saying that, and ultimately these platforms will benefit extraordinarily.”

Currently, Sir Martin estimates that about 45-50pc of global ad spending goes through digital channels, which he had expected to rise to 55pc by the end of 2022. But now he has upgraded that prediction to 57.5pc by 2022 and more than two thirds by 2025. He also believes the crisis will “accelerate the pathway” for Google, Apple, Microsoft or Amazon to reach market capitalisations of $2tn.

A similar dynamic is visible in retail. Data from CommerceNext, a professional network for retail marketers, does show that smaller merchants are seeing customers switch to e-commerce. But Scott Silverman, the network’s co-founder, warns that almost none are making enough to compensate for the loss of their physical shops. Amazon, by contrast, was already profitable even before switching boosted its sales of household goods by hundreds or thousands of percent.

Another important factor is tech giants’ huge cash reserves. Historically, investors have often criticised cash-rich companies for hoarding money that should be reinvested or paid out to shareholders. Comparable behemoths in other industries are rarely so flush: Walmart, whose 2019 revenue was close to Google’s at $142bn, held $9.5bn in January, while Royal Dutch Shell, whose $352bn turnover far exceeded Amazon’s $296bn, held around $18bn.

Yet most Big Tech firms have enough cash on hand to last two or more years with zero revenue (with the partial exception of Amazon, which has months).

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